Directorate of distance education

Product Strategy
Similarly, there is no guarantee for a producer that their product/(s) are actually 
been stocked by the retailer. Direct distribution gives a producer much more control over 
these issues
New Product Development Design

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Three major areas of product management
➢ New product planning and development
➢ The product life cycle
➢ Strategic product management
New Product Planning in Channel Management
➢ Encouraging channel member input into new product planning
➢ Fostering channel member acceptance of new products
➢ Fitting the new product into channel member assortments
➢ Educating channel members about new products
12 Steps for New Product Development
The following steps briefly summarize the major dimensions of 
new product development.
1. Clarify the Organization’s Goals and the Strategic Role of New Product 
Development for Competitive Advantage 
New product development can play a variety of roles in defining 
corporate strategy to gain competitive advantage. This variability 
makes the process of new product development subject to the emerging 
organizational issues of the day. In general, a long-run, focused, and 
ongoing strategic commitment to attractive market opportunities should 
define the role of new product development. New product development 
should be integrated into an organizations strategy and significantly 
contribute to its perpetual renewal.
2. Build Flexibility to Cope with and Mediate Environmental Turbulence 
Turbulent global business environments are the source of new 
product opportunities and problems for an organization. Consequently, 
the critical factors defining the organization s market environment for new 
products must be scanned on a regular basis. In particular, the effects of 
technology that reduce the life cycles of a firm’s products and services must 
be carefully monitored. For example, the effects of changing information 

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technology will continue to alter the way organizations innovate, design, 
manufacture, and market new products, as well as the way consumers and 
other stakeholders respond to those products. They may even redefine 
markets from traditional channel-dependent institutions to direct, 
interactive exchanges between buyers and sellers. Consumers may dial up 
a manufacturers electronic catalog, send in specifications, and receive a 
customized product (from flexible manufacturing processes) through an 
express delivery service in days.
3. Anticipate Market Acceptance of New Products
The crux of new product development is identifying the unmet 
needs of potential buyers and other key market stakeholders as the 
basis for defining market opportunities and translating them into core 
new product concepts. Potential buyers who are affected by turbulent 
global environments respond largely to their own needs and problems. 
Identifying the needs of potential buyers and segmenting markets 
according to those needs is a challenging prospect, but one that enhances 
new product acceptance. 
It requires a variety of research approaches that should bring the 
innovating organization as close to potential buyers as possible. In fact, 
for many situations, new product development should be viewed as an 
interactive relationship between the innovating organization and potential 
buyers (and other key stakeholders) to jointly define and develop the new 
product. The best way to anticipate market response for a new product 
is to jointly create it with potential buyers, then estimate when and how 
many consumers might enter the market to buy.
4. Prepare the Organization for the Change Needed to Develop New 
Products on a Regular Basis
The new product development paradox suggests that organizations 
respond to the demands of a new product in ways that often create 
organizational resistance and slow development time. To overcome this 
resistance, strong leadership, good management, cross-functional teams, 
and new product champions are crucial. Although the prescription for 
success may be clear, implementation can be difficult. How does the 
interruption of organizational processes by new products affect individual 

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career patterns? What are the incentive systems that will motivate highly 
qualified individuals to join high-risk new product development teams? 
Where in the organization should the new product development team be 
located—internally or externally?
5. Operationalize an Ongoing Process of New Product Development
How the organization decides to respond to environmental forces, 
organizational resistance, and market stakeholder needs defines its new 
product development process. This process has been observed to be 
sequential, overlapping, holistic, or chaotic. However, because business 
situations vary, each organization should craft a process that enables it to: 
(1) Maintain a strategic focus, 
(2) Remain flexible to cope with varying degrees of environmental 
turbulence, 
(3) Interact with the market to anticipate and/or overcome friction in 
formulating the new product, 
(4) Integrate organizational efforts and resource commitments to 
motivate the process through cross-functional new product 
development teams, and 
(5) Commit to new product development as an ongoing process of 
organizational renewal. 
The process should encompass different levels of product concept 
refinement (ideas, concepts, prototypes, products, and launch programs) 
and critical management activities (diagnosis, search, design, evaluation, 
decision making, implementation, and monitoring).
6. Build a New Product Decision Support System
Viewing new product development as an ongoing organizational 
process re-’ quires a decision support system to provide timely information. 
Key elements are identifying new product decision problems, modeling 
those problems, establishing a data base of the important variables 
and relations in the model, collecting and analyzing the data through 
marketing research methods, and using optimization procedures to find 
the best decision. The design and implementation of new product decision 
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support systems should be linked to an organization wide system to build 
a useful historical database, yet provide a capability for off-line analysis 
to support rapid retrieval and manipulation of data. Further, the role 
of decision-maker judgment in data collection and modeling activities 
should be integrated into the new product decision support system, albeit 
with care and scrutiny in order to continually learn from its use.
7. Estimate the New Product Market Opportunity
The objective of market opportunity forecasting is to clarify the 
nature of a market opportunity and to estimate its market potential and 
market penetration. To accomplish this objective, a model of critical 
factors that drive the new product opportunity should be formulated, 
data should be collected to operationalize the model, and the resulting 
forecasts should be updated throughout development. Estimates of year-
to-year growth, possibly obtained from a data base of analogical diffusion 
models, are critical for rapidly deciding the value of a new product idea. 
Unfortunately, the procedures for quickly screening new product 
ideas with such information rely heavily on judgment. Future research on 
expert systems and industry-based product analogy data bases may help 
to improve the speed and reliability of market opportunity forecasting.
In addition, the use of enhanced scenarios employing advanced 
multimedia technology to further define a core concept in the context of 
rapidly shifting environments is a promising way to better understand the 
possible evolution of and response to new products.
8. Formulate a Sales Forecasting Process that Captures Market Response 
to New Product Alternatives
In developing models for any of the forecasting processes, but 
especially sales forecasting, several guidelines should be considered:
➢ Develop a system of conceptual models that includes relevant 
variables.
➢ Develop a managerial decision model that is simple, intuitive, and 
logical; if after very careful study it is not understood, revise it or 
don’t use it. 

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➢ To the extent possible, develop rigorous submodels of selected 
variables in the spreadsheet model to improve estimation and link 
decisions to market response.
➢ Use a variety of data sources (market studies, expert judgment, 
secondary data) and methods (such as perceptual mapping, 
positioning, conjoint analysis of preferences and simulations) to 
operationalize the models and submodels.
➢ Submit the model to sensitivity tests with different values and check 
for robustness (for example, using the “what-if” tool on computer 
spreadsheets).
➢ Check assumptions carefully.
➢ Use multiple, different, and independent approaches and reconcile 
estimates when they are divergent.
➢ Formulate alternative scenarios using variation in the values and 
assumptions of the model—and consider contingencies.
9. Establish a Financial Forecasting Capability that Provides a New 
Product Control Chart 
Combining market opportunity and sales forecasts with estimates 
of new product costs, investments, risks, and development cycle time 
provides a financial control capability that can be summarized in a control 
chart. The format of this control chart should be agreed upon by the new 
product team at the outset of the project and followed thereafter. 
It should include the key measures of performance that guide the 
pre-launch development and post-launch tracking of the new product. 
Continual updating of all major forecasting processes to reflect changes 
in the shape of the new product and in the organization and market 
environment is the basis for realizing a capacity for control throughout 
new product development.
10. Consider Test Marketing as a First Step to Implementation
Prior to launching a new product, it is strongly recommended that a 
market entry strategy and launch marketing program be orchestrated and 
tested. This process should involve the use of simulated, controlled, and/

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or conventional test marketing to evaluate, decide, and refine the product 
and its launch program. Designing and implementing test marketing 
approaches should consider the nature of the implementation problems, 
the new product, its importance to the organization, and the amount of 
uncertainty in the market environment. In some cases, test marketing 
can be bypassed in favor of immediate market entry. This approach can 
succeed with careful attention to tracking the new product launch and 
modifying accordingly.
11. Develop a Market Entry Approach that Capitalizes on the Current 
Market Situation and Complements the Strategic Role of the New 
Product
Market entry for new products is highly situational—being first does 
not always pay. The market entry approach should reflect environmental, 
organizational, and market factors (potential buyers, competitors, trade, 
stakeholders) that define the situation. A market entry approach should 
be based on the timing, scale, and resonance of the launch marketing 
program. Using market opportunity, sales, and financial forecasts can 
provide input to an approach for modeling market entry decisions. In